News analysis

Greece's woes

A reprieve, nothing more

RIOTING in Athens, a crucial late-night vote on austerity in the Greek parliament and just enough accomplished to unlock the latest round of bail-out money from Greece's official creditors when euro-zone finance ministers meet again in Brussels on Wednesday. The euro-crisis script has not changed much over the past year.

If things run to form, the risk of imminent, disorderly default will be deferred this week. Most private-sector creditors will agree to swallow a big loss on their holdings of Greek bonds; and Greece will legislate to ensure that hold-out creditors are forced to accept the same terms. Official creditors will nod through a €130 billion ($172 billion) bail-out, enabling Greece to meet a big bond payment due in March.

Greece's agonies are by no means over, however. Although the country's debt burden will be cut as a result of the private-sector losses, the relentless rhythm of regular troika assessments and poisonous rows over disbursements will continue. The weekend's events do nothing to instil confidence that Greece will suddenly start fulfilling its promises. Forty-three deputies were expelled from their parties for voting against the caretaker government of Lucas Papademos. A requirement that the leaders of the main parties have to follow through with cuts regardless of the results of coming elections will be tested to destruction when campaigning actually begins.

So the rest of the euro zone will probably keep confronting the same old question: whether they are prepared to keep handing over cash to Greece. The evidence of recent days is that the patience of euro-zone leaders is running out. They took a tougher line in last week's negotiations than many had expected. The focus on Germany's willingness to pay up risks distracting attention from other creditor states, like Finland and the Netherlands, which are equally fed up with handing out money and have fewer hang-ups than Germany about playing the part of good Europeans. And if Italy and Spain are able to make decent progress in dealing with their own public finances, the rest of the euro zone will feel more confident about limiting the fallout from a decision to turn off the Greek tap. Greece has delayed a messy default, but it will happen eventually.

A population of 11 million with the highest paid public sector in Europe, full pension rights at age 55 and an economy based on Fishing, Agriculture, Shipping and Tourism is unsustainable in any circumstance once the bond tap is turned off.

Even then though one that paid its taxes probably wouldn't need further deep cuts.

One plagued by endemic corruption and regulatory dysfunction at every level should never have been granted credit in the first place.

As to "razing its economy to the ground", the Greeks are doing a remarkable job of that themselves. You have to wonder what they'll do when the actual poopoo hits the fan?

Many agree with you. The huge amounts that were borrowed by previous Greek governments were used up right then, never thinking that payback time will approach as sure as eggs is eggs.

Since the Greek society as a whole, back then, benefited from the provided credit, the Greek society as a whole is under an obligation now, if the current Greek people like it or not. In time the Greek public and the Greek media should have told their politicians: "Because we don't like to put ourselves under obligations that we can never repay ... please stop borrowing". However, this never happened.

Now the question stays unanswered: Who should pay for Greece's previous spending? The taxpayers of other countries who never befitted from these loans? Why should these people pay for the spending spree of the Greek people?

This is why the contemporary Greeks should force their politicians to declare "bankruptcy" if they can't or don't want to pay back their debts. Let the lenders suffer . . . not other countries taxpayers!

Take to the streets and don't just shout "No more austerity!", but rather "we want bankruptcy" and "we want our own currency!"

But so far the world is missing such signs on Athens riot-prone streets.

Please, show us how to do it, be our role model. Who is stopping you from helping?

Why don't you send a letter with some money to Mr. Samaras, Papademos or any Greek politician, saying: "Dear Sir, enclosed you find my personal gift for the Greek people. I appeal to your honesty and reliablilty and want you to help those Greeks who need the money the most. Please use my gift to create jobs and wealth for your country. And please, don't spend the money yourself and don't hide it in a bank in Liechtenstein." Let's see what happens ... LOL!

From what I see there are nations that are tightening the belt and make their debt payments on time and nations that set fire to some buildings, kick riot police, threaten their creditors and…, and they get reductions of debts of up to 70%!
I don’t think it’s decent to witness the Greeks rioting and threatening and others silently going through hell and back to meet their obligations. This is not fair play.

The history of civilization, geopolitics, power and war have always been about LAND and TERRITORY. Wars have been waged for decades and even centuries over European land borders which historically fluctuate in power struggles. Prior to WWII all borders were fluid, fought over and stewed over for generations like the Balkans. Europeans were either at war or preparing for war.

Let the Debtor European Nations Sell Land to the Wealthy Nations who Own the Debt.

Land changes sovereignty but remains in Euroland. We live in a post military world where land holdings do not insure security or sovereignty. Does it matter if Crete has a German or Greek Flag? Not really, just that the economy and tourism keep buzzing.

Greece has over 7,000 islands, many are uninhabited. More seagulls than people. Sell Crete to Germany and have Greece erase its entire debt! Greece can be saved for less than 3% of its territory.

Italy can be saved by selling Sicily.

Ireland could part with a few cold but scenic Atlantic islands.

Portugal has the the Madeira islands.

World Wars have been waged for far less land. Let these be non militarized tourist zones with new sovereignty. Essentially a new flag, but the same people. Allow only peaceful development with resorts, retirement communities and tourist traps. It would stream billions more into development and infrastructure to the Southern Mediterranean: new airports, ports, distributors, construction, hotels, retail, and homes.

Let this be not just a EU Auction to the snow-bound Germans, Austrians and Scandinavians, but open it up to wealthy Swiss, Americans and even Chinese sovereign funds. It is an eBay auction but bidding starts in the Tens of Billions and may approach a Trillion. Any currency as long as it's green.

This Simple Solution will enable Greece to Remain in the EU, enable Greeks to keep the Euro currency, inject billions of investment and construction into development to the Southern Mediterranean, allow the elderly in cold countries to live out their lives in warm sunshine, and relieve Greece from a suffocating debt that they may need generations to repay. No one needs a haircut. Banks stay solvent. No Lawsuits. The Euro remains the Greek Currency. And Greece is even more entwined into Northern Europe and its neighbors. And no need for job cuts, salary cuts, benefit cuts and austerity. No riots and anarchy.

Unloading scenic but unproductive islands that account for less than 5% of your land and has no strategic importance in the Post Cold War Era is a small price to pay for relief for a suffocating national debt that will take generations if not a century to pay off.

IT is WIN-WIN.
Let Monetary Paper Debt become Real Estate
IT is a Simple Market Solution.

Demonstrating against something - I can support that. Rioting.. not very elegant but sometimes understandable to draw attention. But putting Athens on fire, like those rioters did last night, made me lose all my respect. They randomly burnt people's homes and businesses , basically harming their fellow citizens who are in the same boat. This is truly unacceptable and simply shows, that some Greeks have completely lost it.

The Governments that created the problemns were voted in by the people, so unless one questions the merit of Democracy , there is nothing to complain about.
As for poverty, the Greeks of the after war period saw the real poverty , what we have now is a reduced spending capacity. And the social fabric is strong so there is a lot od support from families and communities. Nobody is hungry.

As for unemployment , how come we still have so many immigrants doing so many jobs then? When we were looking for a carer/ nurse for my terminally ill father, we could find no Greek , despite even the high pay, as it is a tough job.

Young Greeks have too many degrees and expectations, the ones who really want to work, trust me , they do find work. It may not be of the level of their education but they can make a living.
But just too many spoilt brats prefer to hang around and live off their parents handouts and pensions.

The good thing about the crisis is that Greeks are going back to their villages and they will start discovering farming and agricultural produce again,

Then,why you the superior 'Europeans' wanted the European Union,why you wanted a united Europe?Why?Clear answer,can you give one?Τhe main purpose is to make charities into Europe and then like now in the case of Greece shouting right and left how good people are you and feeling irritated of Greeks reactions ?Is this the ANSWER?
No definitely.It's business,any kind of business.You have to sell your products from your industries(so to keep also your employment high,your productivity high,GDP high and your citizens happy as happens now in Germany)to countries like Greece(with lack of any serious industry)ie.your weapons,cars,any kind of hitech items.And when these countries do not have to pay cash,usually they can't like Greece,you are always willing to give them loans.
Loans to loans to control them politically and financially and force them always to thank and not you to them for making business and keep your economies active by these countries.
So whoever texts here for the 'superior europeans' and how they are so patient with greeks etc.,needs to reconsider it on the basis of this cruel world of business and political influence.
Unfortunately Greek citizens are really unlucky in this world as do not have industry and politicians.Two basic parts for a fair game in this unfair world.Γι αυτο οι Ελληνες ειναι βορρα ολων αυτων των αρπακτικων πουλιων,εσωθεν και εξωθεν,δυστυχως.

Some Greek commentators here lament that their country is unjustly accused now; instead they use the well known devious method of crying “Stop thief!” in order to run off with the loot!

Of course, the common Greek women and men are not “guilty” in the sense of having committed willfully a crime. However, the whole Greek society (including those common Greek women and men) lived for over one decade a lifestyle which, in reality, when calculated against comparable proficiency, they didn’t deserve.

Yes, it’s true, the Greek people as a whole didn’t “deserve” the extravagant lifestyle they were enjoying in the past. That’s why they must adjust, now, to their actual productivity. “Austerity”, in this context, is a flawed term. The correct description is: Greek common people must learn to live within the means of their poor productivity and limited economic capabilities . . . or enhance the productivity and capability of their privately owned economic sector. This is not achievable by ever more public spending since public-sector-spending only increases the tax burden on the real economy, making it even more unfit to compete internationally.

Greeks behaved “extravagantly”; maybe not in proportion to other European economies, but “extravagant” relative to Greece’s actual economic performance, if measured by OECD’s “12 pillars of competitiveness”.

Greece’s economic realities wouldn’t have allowed a common living standard much above that of Bulgaria, which has a yearly GDP per capita of $7,250 compared to Greece’s GDP boosted, by irresponsible borrowing and (actually) prohibitive imports, to a towering $27,875 (IMF 2011 estimate).

Yes, the “common Greek” might not be guilty of ‘enjoying’, for more than one decade, a life way beyond his means; but nevertheless, Greece’s elected politicians knew only too well that “the day the eagle shits” will come soon. To cover up their devious borrowing practices, they even involved Wall Street’s money jugglers who helped them to deceive their European partners with debt-masking currency swap deals.

Did the Greek media name and shame the responsible Greek politicians? Did the Greek public, by clear majority, demand prosecution and sentencing of these Greek public office holders who committed this fraud? NO!

Instead, the Greek media and public went the way - repeated by some posters here – of crying “Stop thief!”, stop the evil “Nazis”. Only: The common German (or other European) men, women or children are surely not guilty at all, other than producing highly valuable goods and delivering these goods, in good trust, to the people of Greece, who actually couldn’t afford them.

This "stop-thief-method" is, of course, easier than:

• slimming of public institutions unless they enhance private sector productivity;
• spending on infrastructure instead of “entitlement spending”;
• macroeconomic stability through battling corruption and by removing all “red tape”;
• long term economy-oriented public investment, e.g. in primary education, higher education and vocational training (whereby the private sector should be put partly in charge, coeducationally);
• passing laws to enhance labor market efficiency
• incentives to boost technological readiness (rather than hindering it through nepotism and cronyism);
• analyzing and exploding the possibilities of the existing huge common market (EU) and markets at the doorstep (e.g. Turkey and Middle East).
• aiding and supporting business sophistication and innovation; and last but not least
• sophistication of Greece’s financial market and supporting of private sector investments.

This is the ONLY way to lasting economic successes . . . And not the constant blaming, now, of those who did all of this above already and became, as a result, globally competitive. It is not only ‘cheap’ but also very ignorant to make unfounded accusations against those who made the necessary adjustments, worked hard and didn’t live beyond their means, rather than learning from them.

Many clear thinking readers are meanwhile disgusted by the steady attempt of (obviously) Greek commenters (or at least, Greek apologists) on this blog (e.g. Manuel Moldes) to accuse others of being so naive in the past to trust the Greek politicians . . . And now they wonder why nobody in Europe, besides some like-minded profligate societies, speaks out for the Greek “men, women and children” (as “innocent” as these common Greeks, personally, may be).

Didn’t you Greek commenters notice that this previous European ‘naivety’ towards Greece’s elected governments led now to a total mistrust toward the “common” Greek people as well? And now you are whining that those who erroneously trusted your politicians prior, don’t want to continue to hand their money to you?

If you don’t want to look in the mirror, dear “common Greek men and women”, then at least stop blaming those who acted in good faith by trusting you; better start cleaning up your political and (anti)social cesspool!

Observer: “My advice is to fight for not losing what you already possess and to avoid defaulting because one day you may cry for that what you are complaining and protesting now.” Someone else wrote: "The reason neither Greece nor Merkozy wanted Greece to leave . . . "

While the advice “to fight for not losing what you already possess and to avoid defaulting”, might be appropriate for Greece itself, it’s surely not appropriate for those Eurozone members who feel that they are “pouring money into a bottomless pit” (German treasurer Schaeuble after the riots on Sunday in Athenes).

It is also not correct that neither “Merkozy wanted Greece to leave”.

Angela Merkel openly suggested to (now ousted because of this) PM Papandreou that Greece should leave the Eurozone, this 'invitation' was renewed this week by her treasurer Wolfgang Schaeuble. Who refuse to take this step are solely the Greeks themselves, not only their politicians but also the people by majority. There were no signs up on Sunday in Athens demanding that Greece should leaves the Euro. Wonder why? - Because they want to have their cake and eat it too.

Greece leaving wouldn't hurt the Euro more as it did already . . . and as it will when Greece can continue to blackmail and hurt the Eurozone members when staying in. Greece should leave the Eurozone for the Euro’s sake!

International banks will never voluntarily relinquish their claims fully, because they simply can't.

emma: "It appears Germany cannot help Greece without humiliating Greece. Not a day goes by without some insulting remarks about Greece by German government minister".

I understand German ... and I read their papers, online even on a daily basis!

Nowhere I read "insulting remarks about Greece" (unless cheap, third-class tabloids are meant which I don't read); but I notice some downright honest remarks about Greece's situation.

If truth is already considered an "insult" . . . then good bye free press, and "auf wiedersehen free speech". Such totalitarian conviction might be adequate for the mindset of lowbrows like sherryblack (alias emma) but it is surely despicable in the opinion of most readers of this magazine.

Yes, Chancellor Angela Merkel told Greece in January that "time is running out to agree a deal with its creditors"; a deal laboriously negotiated by Merkel with lending banks in the eurozone, which offers 70% debt reduction of the nation’s eurozone-held bank debt in return for the payout of another €130bn ($171bn) tranche and a bond swap - additionally to the €110bn ($145bn) of bailout loans already given to Greece in May 2010.

So, what is "insulting" about such consideration (even when it sounds like an ultimatum)?

Merkel devoted last year a big part of her available office time on Greece's matters, in spite of the fact that she is not a Greek politician, not even a Eurozone official, but merely the head of government of ONE single eurozone nation.

To run her country's affairs is her main job now (especially since federal elections are coming up in 2013) . . . and not solving Greece's (or the Eurozone's) debt problems. The Eurozone should elect a proper political representation as quickly as possible, including a corresponding spokesperson and a treasurer capable of acting . . . But, of course, the U.K. would never allow this.

Merkel's ultimatum is based on the fact that she is convinced that Greece should, if government and people don't agree to the deal, default altogether and leave the Eurozone, at least for the time being.

Such demand might be seen as an "insult" by many Greek people, but it is for most observers a very honest and realistic estimation.

So far Greek politicians, officially, never mentioned that "leaving the Eurozone" could be a viable option for Greece; this in spite of the opinion of many experts, including Yanis Varoufakis, Professor of Economics at University of Athens, and German Finance Minister Wolfgang Schaeuble, that Greece might be better off if she reforms her economy from scratch, imposing necessary adjustments on its people with her own, more flexible currency.

Former PM Papandreou, who resigned (or rather was forced to resign) merely wanted to put the "austerity measures", which come with any further funding from EU/IMF, to a popular vote; knowing, of course, that his countrymen, yes, wanted the bailout . . . but not the budget cuts and reforms that came with it.

As we all know, it was Angela Merkel, in agreement with Nicolas Sarkozy, who, in return, had issued the ultimatum to Mr. Papandreou: “A Greek NO to the deal, would lead to Greece’s total default and her leaving the Eurozone”, making financially room for insulating other vulnerable and large economies, such as Italy, which needs a firewall as well.

Again, this is not an insult toward Greece, but an outspoken statement of true facts.

Germany guarantees in theory only 27% of all the bailout money which comes direct from EU/EZ sources, plus Germany's sizable share in the IMF (the second biggest after the US). These are Germany's official shares. In reality, Germany's share of EU/EZ is over 90%, since there are only 4 fully creditworthy countries left in the EZ realm: Germany, the Netherlands, Finland and tiny Luxemburg.

If these 4 countries take on more common obligations, e.g. in the form of Eurobonds, the rating of the three smaller countries will be downgraded as well (Finland was warned already not to take on more joint obligations), and the other countries, now still AA+, will receive single A status . . . This leaves Germany as the only creditworthy lender.

Thus, to talk about here which other “non-German countries of the eurozone” are also "guaranteeing" the bailouts, became waste paper in the moment when the others lost their "good credit".

This is why Germany's share of the bailout money for Greece is, in reality, almost 100% (minus the IMF share plus Germany's IMF share) . . . Unless Germany defaults as well, which she almost must if the GIIPS (and other high deficit countries) continue to need bailout money endlessly by not managing to rein in their spending.

That’s why Germany must press for economic reforms and budget discipline - no matter what - since there is absolutely no way that a single country, even the size of Germany’s economy, can uphold the creditworthiness of the whole Eurozone. In this case it would be “Game Over” for the Euro.

That’s why all Euro-haters are trying to press Germany into unlimited commitment towards the weakest links in the Eurozone, Greece, Portugal and Italy, knowing that their goal would be accomplished in the moment they fail to reform.

tk6oTofRu9: "there is no excuse for the bankers who continues to lend the politicians money far beyond their ability to pay it back".

Not one single institution or lender in Europe knew the extent of Greece's borrowings . . . not until Goldman Sachs blew the whistle in December 2009, what would become the "Greek sovereign debt crisis".

Clandestinely, Goldman Sachs and other US investment banks had arranged swaps that effectively allowed Greece to borrow billions of Euros without adding to its official public debt.

While it arranged the swaps, Goldman also sought to buy insurance on Greek debt and engage in other trades to protect itself against the risk of a default on those swaps.

Eventually, Goldman sold the swaps to the national bank of Greece . . . and informed the rating agencies after a new swap deal fell through, then with the new Papandreou government, about the true situation of Greece's level of debt (of course, only AFTER a new deal with the Papandreou government had failed due to lack of sufficient collateral). Not before then investors and governments began voicing concern over Greek deficit levels.

How should other banks, not involved in Greece’s sneaking deals, should have known all this?

Delay is a well-worn proven strategy when faced with disaster, and DELAY IS the strategy the EU is pursuing.

I'm amazed that the Economist is so blind to the obvious.

Is the Economist writer truly that daft; to believe letting Greece default a few years back would have been better for Europe?

This is NOT/has not been about saving Greece.

It IS ALL ABOUT giving the EU time to construct a context for the Greek default that is IN THEIR favor.

It allows the entity facing calamity to better prepare and do all it can to survive whatever may happen.

Without that delay, Europe would have faced a Greek default on the speculator's terms, who don't give a damn about people or nations.

Delay in this case also is a great remedy for the "threat of market reaction/panic" which is worst when things happen suddenly, without warning.

After several years, no entity involved in this game can claim to be "surprised" by what will eventually happen, and thus the market will be able to avoid the panic that often leads to results far worse than the original problem had the potential to create.

All in all Team Merkle deserve kudos for using "delaying tactics" with such skill.

In doing so they have also mercilessly assaulted the defiant spirit of and filled with doubt the international speculators who live for panic defaults and were so looking forward to Europe doing exactly what the Economist thinks was the smart thing to do.

They did this while doing a pretty good job of ensuring the core states of the EU and their native financial system is spared most of the fallout from the eventual Greek default.

Once this is all settled, the odds are pretty good that Europe will have created a shield against speculation driven attempts to destroy economies based on self-perpetuating rationalizations that are only created to justify taking down an economy that would otherwise not tank.

After World War II, Americans helped to rebuild Germany. In this process of reconstruction, the previous system was completely changed and German people weren't humiliated. This way of doing things is complex, it requires a lot of money and energy, but the results are very positive.

The humiliation recipe was the one used after World War I. The Germans had to pay all their debts + complete humiliation. The result of that approach to the problem, is quite known.

I am not an economist, but this idea to punish some generations of Greeks for sins and decision taken by their elite, doesn't look the best way to have the country going into a normal state of things.

Miss Alice, it is not quite the case that Greeks work less hard or less hours (quite the opposite) - it is just that Greek market is so uncompetitive and the whole system so Byzantine that productivity suffers no matter how hard one tries

From the time Greece joined the European Union in 1981 until now it received €78 billion net EU-funding via various development- and cohesion funds. These are approx €130 billion in today's value.

A big part of these multi-billions came from German taxpayers, as by far the largest single net-contributor nation to the EU budget.

Whatever moral rights Greeks might think to have claiming "last century's war reparations" today, any such claims seem ridiculous in the light of these already received development- and cohesion-moneys.

How much more "development"-money do Greek politicians need to fill their and their cronies' pockets? Plz tell us!